Weekly Thoughts

Weekly Thoughts 5 December 2021

Yes, today is not Friday. But Friday broke down, so Sunday will have to do!

So often the inspiration for the content of what I write in these newsletters comes to me at a completely random moment as a story in my head and I always wish I could press a replay button afterwards to be able to write it down as it first came out, because usually the first inspiration is the best version and I never feel I get it quite so good on the regurgitated episode. These words below are no different by their origin.

Last week I wrote about Coronation Fund Managers mentioning an increase in inflation. Then I read articles about inflation the next day in the Saturday press. So here’s my thought for you to follow…

If you have income coming through from dividends of shares that you directly own or might own via an overseas share portfolio I might have put you into, or through unit trust funds such as Marriott’s Dividend Growth Fund (because Unit Trust Funds are actually large shareholders of many companies and then you and I own some of that unit trust fund), then the dividend income from these investments will slowly increase in line with inflation and therefore be of help to you in the end.

What happens with inflation, is that when the widget that you’re buying in the shop goes up in price, like baby powder…. to take an example, what has just happened is that Johnson & Johnson has put the price of their baby powder up, so Pick ‘n Pay put the price up – because they make a mark-up. You and I pay more for it, Pick ‘n Pay and J&J both make more money and then usually both of them will slowly begin to each pay a higher dividend to each of their shareholders, which comes through to us via those investments or unit trust funds I’m talking about. So things go up in price, but if you own some of those things that we all buy, through your investments, you get some of the higher profits in the end, through the increased dividend income. The value of the investment might not actually go up during this inflationary time, but the income can go up. Remember how often I say to some of you, that the short term value of your investment doesn’t matter, especially if you are using the income or building the income for the future.

I am sending this to you from a Mugg & Bean restaurant. If I owned this outlet I was sitting in, when inflation comes, I simply pass the higher cost of living on to you when you walk in. I make you pay more for the cup of coffee. But if you owned some of the shares of Famous Brands, who owns Mugg & Bean, you will benefit in time from a higher dividend income, because Famous Brands will (should – if they want investors to stay with them) pay a higher dividend in due course.

So we don’t have to fear everything about inflation if we own some of the businesses we shop at. But it can take time to see the difference for yourself….

I hope some of that made sense. The replay didn’t work so well.

Weekly Thoughts 26 November 2021

I listened to Coronation Fund Managers in a live online presentation yesterday. They believe we’ll see an increase in local and global inflation over the next few months. The reality is, that for most of us reading this, it simply means we might not order dessert when eating out. For many, it’s a reduction in basic essentials.
They also spoke about the next Covid spike, which is apparently on its way. However, they do not believe we’ll be put under any hard lockdown restrictions due to the economy not being able to afford that.

Weekly Thoughts 5 November 2021

A number of you have recently had questions from me about your Will. I’m on a drive to check through every single client by the year-end. To check that I know where your Will is, that you know where it is and that one of us has actually checked on it too. I then make a note in the ‘client details’ section of your data on our records where it is, who the executor is and the date that I last checked on it. Not just the date that it is dated, but the date I last checked upon it.

If I have a note that I have your Will, I then go and pull your file out of the steel cabinets in my office, I find your Will, I pull it out of its plastic sleeve and I check that it is indeed the original. Meaning I check that the names and signatures are indented into the paper – I’m checking that it is the ‘wet’ copy of your will.

After being involved in a couple of estates this year, as well as being involved in the deteriorating mental health of a couple of clients, I am becoming more paranoid, more obsessed, with knowing where your will is and that it’s actually there. We can get copies of virtually everything else in life, as long as you can prove you are you. You can get a copy of your insurance or investment documents, your driver’s licence can be replaced, your ID, your birth certificate… Why, I even know who to direct you to here in my town, if you need something from Home Affairs that is not quite above board. It will require the accompanying handful of orange or blue pieces of paper with Leopards or Buffaloes on them, but you’ll get whatever it is you’re looking for.

But we cannot get a copy of our Will after we’ve already come second in an accident or our health has declined too far to be placing a legitimate signature on the document. So as I go through this process, if I need confirmation from you, I will be in touch with you.

This afternoon I will be having lunch alone with my British contact man out from Sarasin Asset Managers in London. We’ll talk about their funds, British politics, global events, first world interest rates… and whatever else he has in his bag. Usually quite an entertaining conversation.

Weekly Thoughts 29 October 2021

Last week I went for my usual just-arrive-for-a-haircut haircut, to my usual hairdresser in a little local shopping centre. I’ve been going to them for many years and they always remind me that I’m late when I walk in. But this time, they told me that they are closing at the end of the year. They have not been able to cope with and recover from, the covid issues of the past year, where they have seen their clientele drop by too much. They told me that with the rent being R16,000 per month, they just cannot cope any longer. Already the owner’s husband has put some of his own money into the business, money which he won’t be getting back as there is no cash to pay him back. The lady who actually cuts my hair will be heading for Durban, to try to find a job there. So it’s sad to see them go, and I’ll need to find another hairdresser.

Then last week I also popped into my local hardware store, only to find that three shops in that little regional shopping centre have closed their doors and there are now To-Let signs in the windows. One shop was a lovely second-hand furniture shop.

There are obviously still many small businesses who continue to struggle and who have not been able to make it through the last 18 months or are now carrying too much debt to be able to recover. It is really sad, and really rough for these folk. I continue to recognise where I am fortunate in life.

Weekly Thoughts 15 October 2021

This morning I spent two hours alone with a fund manager from Marriott. I decided earlier this week that it was time I summoned him to come and have too much coffee (if such a thing is possible) with me so that I could take him through my head again.

We spoke about the year so far and then what they see for 2022. But I was mainly asking what they see from local and global income sustainability and growth point of view going forward – not so much about what they think regarding capital growth/loss. That’s not quite so relevant and there have been uncontrollable factors at play. Then I also had some specific income growth figures and sums that I had been measuring and playing with that I wanted to take him through.

This last quarter has been a flat one for investment values. The Chinese Evergrande property issue is a problem that is not finished. He also explained to me that this past quarter has been about ‘tapering’: a backing off process following a prolonged period of Covid stimuli packages.

Then maybe the Pandora Papers saga is still going to explode……. It sounds like this should also be the title for Frederick Forsyth’s next novel. And then a movie, like the Pelican Brief…….. especially when you look at the lengthy list of people named in it! The list is there – you can find it on Wikipedia.

It’s OK for there to be months, quarters, even years, of flat or depressed market values. If you are not liquidating capital for income, then we all need these periods of time. It allows our monthly contributions – those of us investing monthly via excess income or fund distributions or debit orders and contributions into our retirement annuities, pension funds, discretionary unit trust funds – to sometimes buy into the funds when the underlying companies are on ‘Sale’. So it’s all OK.

Weekly Thoughts 10 September

I write to you today about this topic below because there are three or four clients dealing with this in one way or another right now: Power of Attorney and Curatorship of Estate.

A number of people might have Power of Attorney over someone. In particular, we might do this to help an aging family member deal with the admin of their lives. If I have your POA for example, and I go into the bank to do an administrative transaction for you, the banker has the right to phone you and say, “Mr or Mrs So and So, did you give POA to Kevin Murray? Are you happy that the POA documents in his possession are from you and are valid and may we continue under his instruction on your behalf?” You need to have the full mental capacity to understand this and to respond saying “Yes”. Or indeed No, if it was incorrect or not meeting with your approval.

However, from the day that you no longer have the full mental capacity to back up your POA on the phone because of some or other mental illness, the POA becomes invalid. A family member, or someone, needs to now go to court to apply for Curatorship of Estate, which gives you the ability to completely manage that person’s affairs. You have now been appointed by the court to do just that. It can be an expensive and slow process to get through, but it’s what is required.

Weekly Thoughts 27 August 2021

A few random, disjointed thoughts this week….

I haven’t written since the chaos week of looting. Life is back to normal in my town… which means you can stop your car wherever you want to for as long as you want to, as long as you put your hazard lights on… and after a traffic light turns red, two more cars are still allowed to go through!

I’m certainly finding this new POPI world very frustrating. So many things that I regularly receive now require me to go and find ID numbers or codes before opening. Very irritating… but part of our lives going forward so better I accept it.

A week ago I listened to an online presentation by Ninety One Asset Managers. A director gave his summary thoughts as follows:

• Damage from the riots & looting could have been worse
• SA is economically better than he expected
• The Vaccination rollout is actually happening fairly efficiently
• The President’s position has strengthened
• The World and SA are in a better state than this time last year

He was more positive than I expected.

Weekly Thoughts 16 July 2021

Well…. what a week it’s been. I have gotten to know people in my neighbourhood that I would never have met. I know who has shotguns, who have revolvers, knobkieries, axe handles, hockey sticks, whips, pangas, paintball guns…. And any form of reason weapon.

With living down here in Pietermaritzburg, I have been a part of our larger neighbourhood coming together and creating our own vigilante roadblocks and checkpoint groups to take charge of the movement of cars and people through the area. We’ve had no choice. We have stood together, all South African groups represented, men and woman, young and old, covering two nights shifts for four nights now. And we have two to go. I’ve done the midnight to 6 am plus daytime action on Tuesday, trying to look serious with my paintball gun.

We have protected our local Spar through tree blocks on either side of the access areas, severely restricting traffic. One guy brought down his chain saw and we simply dropped trees across the road on either side, without asking anyone. We offloaded stolen goods from cars who had completed their town shopping, we turned cars around, helped pile up stolen goods at the police station, protected our local petrol station…. And made fires in the streets to help keep us going through the night.

A very old friend of mine lives in my neighbourhood. He has about 10 academic letters behind his name. I think I’m supposed to call him Doctor – but I cannot remember of what. He and I and others have already spent many hours during the dead of night, debating at large the fabric of societies in general. The merits and demerits of democracy and autocracy and the importance of an independent judiciary. Two conclusions we came to, was that Pick n Pay can retain its name but Takealot should rather change its name to Buyalot!!

It has been a very bad space for our country, on so many levels. I don’t need to tell you that. It will probably become a ‘recorded space’ in our history. Let’s just hope that some good things can come from it.

Weekly Thoughts 18 June 2021

We’re deep into winter now, with the shortest day and the longest night of the year coming around on Monday. Which makes Tuesday something to look forward to.

I’ve finally (not sure that it’s appropriate to say ‘finally’… it just puts something into perspective…) lost two people to Covid in recent weeks whom I personally knew. No longer just knowing someone who’d lost someone. The world is not yet easier.

Two recent South African developments are creating optimism with some asset managers: The fact that the private sector may now install electrical generation capacity and the sale of 51% of SAA. I agree. These are good things.

I was also happy to finally read of an asset manager calling Bitcoin ‘make-believe’ money. No longer just me!

Weekly Thoughts 19 February 2021

I listened to three different fund manager zoom meetings this week.

This included a couple of guys from NinetyOne, (Ex Investec) then a couple of people from a group called Counterpoint, and then the clever people talking from the UK who help run the direct UK property holding investment through FIM Capital, who works out of the Isle of Man.

This last one was very good. They showed us drone footage of a couple of these retail and industrial properties in the portfolio. Its good to hear, and then see, that the people who manage and choose the investments, in this case, choose a physical property to buy into the portfolio, seem to be on top of things and know what they’re doing. They are very happy with occupancy, operations and income streams of the 20-odd buildings in the portfolio. I want to go and visit some of these properties sometimes, to see and walk through what I’m offering my clients to invest in. Maybe next year.

One interesting statement from one of the NinetyOne guys was that, during some of the recovery of the past 10 months, the big money was in the waiting. Waiting is often what investment returns and success is all about. He made a further comment that someone in their twenties has a 60 year investment time horizon. It’s quite a thought actually.